Tech firms accused of using Ireland as tax haven
THE Government was on alert last night after US lawmakers described the country as a "tax haven" and accused American technology companies operating here of using Ireland to avoid paying corporation tax at home.
The US Senate's Permanent Subcommittee on Investigations has begun a probe into how American companies funnel international profits through countries such as Ireland with lower corporation tax rates than the US.
Using Microsoft and Hewlett Packard as case studies, the committee chairman Carl Levin said "the tax practices and gimmicks range from egregious to dubious validity".
If the US does prevent companies from using Ireland for tax purposes it could have a dire effect on the economy. Numerous companies, including Google, Facebook and Microsoft, who between them employ more than 4,000 people here, are believed to use Ireland for its tax efficiencies.
A government spokesman declined to comment, while a spokesman for the IDA, which has attracted most of the firms here, said the agency was studying the report but declined to comment further.
The committee accuses Microsoft of using its Irish firm Microsoft Ireland and other subsidiaries in Puerto Rico and Singapore to avoid paying tax at home.
"Microsoft Corporation has used aggressive transfer pricing transactions to shift its intellectual property, a mobile asset, to subsidiaries in Puerto Rico, Ireland, and Singapore, which are low or no tax jurisdictions, in part to avoid or reduce its US taxes on the profits generated by assets sold by its offshore entities," the committee report states.
"Microsoft also utilises entities in Ireland, Bermuda, and Singapore in its efforts to shift profits out of the United States and avoid US and international taxes.
"While over 85pc of Microsoft's research and development takes place in the United States, the profits from that intellectual effort are transferred out of the United States and shifted into tax havens," the report adds.
The hearings are investigating how many US companies are "in some cases de facto expatriating the untapped profits back to the US, contrary to US tax policy".
While the investigation is looking at the entire technology sector, the committee have prepared reports on Microsoft and Hewlett Packard as case studies. Both companies deny any wrongdoing.
Microsoft and numerous other American technology firms who have international headquarters here are believed to use an accounting technique known as the "Double Irish", a tax efficiency that allows profits from a multinational to be routed through Ireland to a tax haven without being liable for corporation tax in Ireland or the US.
The scheme is completely legal and there is no suggestion whatsoever of impropriety in the scheme's use.